BofA fires back at New York over modification violations

By Karen Freifeld

Published May 10, 2013

Reuters

Copyright Reuters 2013

NEW YORK – Bank of America Corp has fired back at New York Attorney General Eric Schneiderman after he threatened to sue the bank for violating the terms of a $25 billion settlement designed to end mortgage servicing abuses.

In a letter to Schneiderman, lawyers for Bank of America said they were "surprised and disappointed" the attorney general thought the bank engaged in "flagrant violations" of the timeline to process mortgage modifications.

The lawyers also said Schneiderman cannot sue until the bank has an opportunity to cure any alleged violations.

"Bank of America has not committed any potential violations ... let alone failed to cure those potential violations," attorneys Meyer Koplow and Theodore Mirvis, of Wachtell, Lipton Rosen & Katz, wrote in the May 7 letter. Reuters obtained a copy of the letter on Friday.

Schneiderman announced on Monday that he planned to sue Bank of America and Wells Fargo & Co for violating the terms of last year's National Mortgage Settlement, which was brokered between five major banks and 49 attorneys general.

Schneiderman did not say how the other three banks - JPMorgan Chase & Co , Citigroup Inc and Ally Financial Inc - were performing.

He said Bank of America had 129 violations since October and Wells Fargo had 210 and that their tardiness put homeowners at greater risk of foreclosure.

On Friday, Wells Fargo said it was committed to abiding by the settlement.

"We expect that a constructive pathway may still develop with the New York AG," the bank said in a statement.

Asked about the Bank of America letter, Schneiderman's spokesman, Damien LaVera, said: "At least Bank of America will respond to one New Yorker promptly."

LaVera said the attorney general has "the right to bring a suit against parties that violate the servicing standards and will do so."

Schneiderman has said he would seek injunctive relief and an order requiring the banks to comply with the settlement. His statement did not say he was seeking damages or penalties.

It is unclear how far he can take his efforts because they come outside the primary channel authorized by the settlement to address any potential violations. The settlement's monitor is authorized to first work with a servicer to correct any potential violations and sue only if the errors are not fixed.

Bank of America said that, under the terms of the settlement, the attorney general's office has no right to commence an enforcement action and requested that the notice of intent be publicly withdrawn.

The bank's letter asked for evidence of any violations so it could provide remediation to homeowners without waiting for any "adversary process."